Thankfully, Mr Jaitley delivers!

The new focus is on the poor, the downtrodden, the vulnerable and the farmer -- all of whom find repeated mention in the speech

Arun Jaitley’s third Budget is a masterly combination of good economics and good politics in the face of a challenging fiscal situation.

He has delivered his basic objective of observing fiscal discipline for the third year in a row -- something that few finance ministers can claim.

In the process, he has reduced the government’s borrowing programme for a second successive year, and controlled the share of revenue that is eaten up by interest payments.

He has got a response in terms of lower interest rates in the bond market, and put the onus on the Reserve Bank of India to respond by lowering policy rates.

Reserve Bank of India must recognise that real interest rates are too high and affect personal as well as corporate spending behaviour.

Politically, Mr Jaitley has prepared the ground for some talking points in a 2019 re-election campaign: ‘Bijli, Sadak, Cooking gas’ would be a substantial claim to make, given the targets set for universalising access to these by 2019.

That’s not a good substitute for jobs, but the Narendra Modi government has clearly shifted its attention from the urban and the middle class, which finds no mention in Mr Jaitley’s Budget speech except for their having voluntarily given up the gas subsidy.

The new focus is on the poor, the downtrodden, the vulnerable and the farmer -- all of whom find repeated mention in the speech, along with announcements on crop insurance, accelerated irrigation programmes and a more broad-based procurement programme as a price support measure.

The shift towards greater progressivity in taxes fits into the political framework of the Budget.

The higher tax surcharge at the top end will affect between 50,000 and 100,000 people (the '0.01 per cent'), as will the new dividend tax in the hands of the recipient.

The more generous exemptions on Income Tax and housing incentives are given for those at the bottom end of the income scale, while cars too have been taxed progressively.

All this is entirely unexceptionable; where there is an additional burden, it is not very onerous and falls well within the capacity to pay.

The arithmetic of the Budget is commendable -- though the current year’s numbers have been saved by additional taxes on petroleum products, which have made up for the shortfalls in corporation and income tax collection (pointers to the state of the corporate sector).

For next year, Mr Jaitley has managed the difficult feat of sticking to the fiscal correction track despite the burden of the Pay Commission’s award.

This has been done through exceptionally tight expenditure control -- other than pay and pension, the expenditure increase is barely six per cent; the increase is nothing at all in inflation-adjusted terms.

Many Budget items have been squeezed, including defence, but unfortunately not subsidies -- which is particularly regrettable after the savings on the petroleum subsidy.

Transfers to states, when viewed over a two-year perspective, show an increase of 31 per cent, suggesting that the government has used various stratagems to partially neutralise the over-the-top generosity of the Fourteenth Finance Commission -- including through the creation of a rash of new cesses whose revenue does not get shared with the states.

This is poor fiscal practice, and should be abandoned.

Equally poor practice is the continuing business of announcing specific changes in taxes and duties on individual items of production—something that encourages business lobbies to get active.

The objective should be to take a permanent break from the bad old tax habits and move towards uniform tax rates. Meanwhile, for the second time in three Budgets, Mr Jaitley has fiddled with the qualifying period for capital gains tax exemption.

He first raised it for debt mutual funds to three years, equalising it with investments in real estate, but has reduced it now for unlisted stocks to two years, even as the period for listed stocks remains at one year.

Surely there is a case here for some rationalisation.

The same goes for the introduction of a dividend tax in the hands of the recipient, as it kills the logic of the dividend distribution tax.

Simplification would be achieved if the latter were scrapped and all dividends taxed in the hands of the recipient.

However, the finance minister needs to be complimented for the most sweeping set of announcements yet for facilitating tax compliance, reducing the scope for disputes and clearing the backlog of cases in appeal.

The widening of the window for a presumptive tax regime has much to commend itself, as do the steps for reducing the interface between assessing officers and assessees, for reducing the scope for harassment (which is still widespread), and for increasing transparency.

These are significant steps in the broader programme for improving the ease of doing business in the country.

The window for making good on past tax evasion may work better than the unsuccessful scheme announced last year, given the comparatively lower (but still punitive) tax that disclosures will attract.

Other initiatives to be commended are the belated introduction of an exempt-exempt-tax regime for long-term savings schemes.

But the switch to a lower corporate tax regime is timid, being too limited in scope.

On the expenditure side, Mr Gadkari as transport minister should be the happiest member of the Cabinet since he has got the most generous outlays for the roads programme, in a Budget that otherwise stands out for tight expenditure control.

In the space of two years, his ministry’s outlay has grown from Rs 28,679 crore (Rs 286.79 billion) to Rs 1.03 lakh crore (Rs 1.03 trillion), an exceptional increase of 260 per cent.

This has the additional merit, along with the incentives given to low-cost housing, of boosting construction which, after agriculture, is the country’s largest provider of employment.

Along with the big capital Budget for the railways, and a power programme that focuses on clearing up demand bottlenecks, the overall infrastructure sector has got due attention.